Traditional movie stores are feeling pressure from alternate forms of movie
rentals. Rental chain Blockbuster has found competition from services like
Netflix to be stiff. To combat the loss of customers to Netflix and similar
services, Blockbuster launched its own web-based rental service.

Blockbuster has been looking intently for ways to improve the profitability
of the company and has been offering movies for sale in its stores and special
bundles of games and game consoles as a way to get customers into its retail
stores.

In April 2008, Blockbuster made an offer
to buy Circuit City at $6 to $8 per share, amounting to as much as $1.35
billion. At the time Blockbuster made its intention to pursue the purchase of
Circuit City, it also noted that management of Circuit City had failed to
provide Blockbuster with the due diligence it needed to make a definitive
proposal to purchase the company.

In May of 2008, Circuit City finally opened
its books to Blockbuster to allow it due diligence to make the decision to purchase
or not. Today Blockbuster announced that it is withdrawing its proposal to
purchase Circuit City.

"Based on market conditions and the completion of our initial due
diligence process, we have determined that it is not in the best interest of
Blockbuster's shareholders to proceed with an acquisition of Circuit
City," said Jim Keyes, Blockbuster Chairman and CEO. "We continue to
believe in the strategic merits of a consumer retail proposition that would
bring media content and electronic devices together under one brand. We will
pursue this strategy through our Blockbuster stores as a way to diversify the
business and better serve the entertainment retail segment."

Circuit City has not commented on the withdrawal of the proposed purchase at
this time.

“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads